Tips for Filing an Amended Income Tax Return
If you find that you made an omission or an error on your income tax return, you may amend the tax return using Form 1040X within three years (including extensions) of the date you filed your original return or within two years after the date you paid the tax, whichever is later.
If the amended return is based on a bad debt or worthless security, you normally have seven years after the due date of the return in the tax year this event occurred to amend the return.
You may also amend your tax return to make certain elections or to make a claim for a carryback due to a loss or unused credit, although in some cases you would use Form 1045 rather than Form 1040X. Check with your tax professional to find out which form is applicable.
If you are looking for a refund of penalties and interest that you have already paid, use Form 843, Claim for Refund and Request for Abatement to file. You will likely never receive a refund of interest paid--interest is normally refunded only if the IRS makes an error.
If you were audited by the IRS that resulted in an additional income tax or possibly a refund, and you live in a state which levies an income tax, you may need to file an amended income tax return with your resident state. The IRS shares its audit results with your state government--so if you do not file an amended return, you will eventually get a bill from your states taxing agency. Im not sure if it would voluntarily recalculate your tax and issue a refund check, so you may want to file the amended return to claim it.
Completing Form 1040X can be a bit tricky, so you may want to read the instructions, which are provided here www.irs.gov. Report the originally filed data in column 1, the changes in column 2, and the corrected data (netting column 2 against column 1) in column 3. Calculate the new tax or the refund. Be sure to fill in the Explanation of Changes section. Be succinct in your wording. For example: To include previously omitted alimony income in the amount of $30,000 paid by (Name and Social Security number of ex).
Attach a copy of the applicable pages and schedules of the original tax return, marking each page As Originally Filed and highlighting those words in yellow. Then attach a copy of the newly-calculated return, marking each page As Amended, also highlighted in yellow. Provide copies of any applicable documents.
If you owe tax on Form 1040X, make sure you write a check indicating Form 1040X, the tax year, and your Social Security number on the memo line of the check. If you pay off the balance with more than one payment, be sure to provide that information on the memo line each time. If you dont, the IRS may apply the funds toward another tax liability and youll have a heck of a time straightening that out. If you pay the additional tax within a year of timely filing your amended return, the IRS will not levy interest and penalties.
If you are amending a current year income tax return, you should wait approximately eight weeks after the original was filed to amend the return--it takes that long for the IRS to process the original return. Until it processes it, they wont know what youre talking about. If you are filing to claim an additional refund, wait until you get your first refund check before filing.
Ive often been asked if amended returns are more likely to be selected for an audit. The answer: who knows? The IRS will not tell you why a return is being audited, but you can usually guess the reasons. Personally, I believe if you are amending a return to get a refund over a questionable deduction like: I previously omitted a $12,000 deduction for my business trip to Paris, or To claim an additional $10,000 deduction for entertainment expenses omitted from my Schedule C, you are definitely waving the red flag in the bulls face.
If the amount of omitted deductions is small, it might not be worthwhile to amend the return. Instead, put a sticky note on the receipt(s) that says: Never deducted and put the receipt in your tax file. If you are audited, you can ask the auditor to include the deductions during the audit process.
You neednt amend a return to include a W2 you forgot about or some tax document that showed up in the mail after you filed the tax return. The IRS has a copy of those documents and will just recalculate your tax liability and send you a bill. While Im sure they would appreciate your honesty and willingness to come forward to pay the additional tax due, you neednt file an amended return.
A Form 1040X cannot be electronically filed. Amended returns take eight to 12 weeks to process, so be patient.
Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all fifty states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, CA and the author of Entrepreneur Press book, Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn't Want You to Know, available at all major booksellers. Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.